College Loan Debt Forgiveness- Real World Ideas
Regularly I’m asked about College Loan Forgiveness. Since it is a sensitive topic, (after all, it is about money) I have shied away from addressing it. Maybe some fresh ideas are in order.
Everyone agrees college loan debt is hobbling an entire generation of former students. The proof is in the staggering 1.6 trillion college loan debt increasing every semester. The fight starts between those who DO have debt and those who don’t. The debt-free crowd does not want loan forgiveness, as they would feel cheated. The debt-paying crowd laments the incredible financial burden and limitations it places on them and their futures.
The thing is, you are both right.
Those who were able to pay-as-you-go feel loan forgiveness is a slap in their face at what they sacrificed to finish debt-free. Those saddled with decades of repayments and merciless rules say no one explained it to them adequately.
Again, I believe you are both right.
I remember my daughter’s University financial aid person rattled off a well-worn paragraph about borrowing, with a “be sure you pay it all back!” tacked at the end. Her delivery felt so wrong. I also remember the unrelenting & at times overwhelming university bills over her four years there. Either path is difficult.
We can all agree on this; the current financial aid system is misleading, complex, and unfair to the consumer. It seems the unspoken goal is to hurry up & sign up, so they can go on to the next victim, I mean, student.
Here are some fresh ideas that could make a huge difference for future students & current loan debt sufferers.
1) MANDATORY FINANCIAL SEMINARS Every future STUDENT and at least one legal guardian/parent MUST attend a required training seminar detailing projected costs, accrued interest, common repayment schedules using realistic local numbers. This 1/2 day seminar would issue a completion certificate to the participants. No seminar, no certificate, no Federal loans. Online seminars would be required for out of state students &/or international students, too.
2) NATIONAL SERVICE RESERVES OR FULL-TIME SERVICE REPAYMENT OPTIONS We need a National Service Corps, dedicated to helping community non-profits across the country. Students could apply to join this cadre after they leave school. They can choose the full-time option, where they are tested & selected to work for 2-3 years, aka, AmeriCorp. They would be paid a modest salary plus a lodging and meals allowance. Each year of work would earn college loan debt forgiveness of $15,000. While in “service” no interest would be added, either. If the students are already out and employed, they can join the “Reserves” where, much like the National Guard, they commit to one weekend a month plus summer training/work. This option lets them cancel $8,000/ year of student loan debt. Since the average national debt per student is $31,000, many students can work it off in 2 years full time or 4 years in Reserves time.
What can be done to help those stuck in re-payment hades now? Here are a couple of thoughts.
3) REQUIRED COLLEGE LOAN REFINANCING OPTIONS PROGRAM Just like a requirement to be trained on borrowing, you should be required to attend a re-financing seminar. Too often people are in such financial pain with the Federal programs, they run headlong into a private loan without understanding the major differences. No certificate, no private loan. Same rules.
4) LOCAL COMMUNITY SERVICE PLAN OPTIONS. Some students are married or have a family when they graduate college. They need relief but might be working multiple jobs, etc. Local charities such as the Red Cross, Salvation Army, etc. could apply to receive volunteer placements from the National Service Corps. Using technology, the volunteer logs in their volunteer hours on a national database platform. Here’s a fun kicker- if you have family or friends, they can volunteer and give you hours credits towards reducing your loan debt! Your college loan debt principal could be reduced based on hours served every year.
Both the initial college financing and loan-refinancing seminars must be taught by trained local financial professionals from banking, insurance, or investment backgrounds. No one connected to any academic institution should be permitted to teach them as that could be seen as a conflict of interest.
And yes, this would be a Federally-funded program. I am reluctant to suggest adding to Federal programs, but, since the loans are Federal, part of the solution to this mess should be Federally funded. The cost should be taken from the interest earned on the loans, so no new taxpayer money would be involved.
This is my proposed solution to this mess. Mandatory financial pre-training, AND, National Service Options when you leave school. You need to know what to expect going in AND you need a chance to bail yourself out later through real community service options. If you currently are in debt, you should be allowed to join the Reserves program or local community service agencies to lower your debt. If you want to switch to a private loan, you must attend the training seminar that explains the pros and cons without prejudice in either direction.
Once again, my book, ENOUGH! The College Cost Crisis is designed to help you see this problem and find the cost savings options right for you and yours. You can do college in countless different ways today. If you take a good look at other options, your wallet and your future finances may thank you for the rest of your life! Above all, the book shows you gobs of ways to avoid being trapped by debt.
Forward this blog to friends in high places-especially anyone in the federal Department of Education. Some fresh ideas seem to be needed!!
Next week, what The Swami Says has come true. You don’t want to miss it!
Until next time,
All my best,
Bonnie
